Merry J. Chandler v. Commissioner.

Dkt. No. 6201-02L , TC Memo. 2005-99, May 9, 2005 .

[Appealable, barring stipulation to the contrary, to CA-4. -- CCH .]

[Code Secs. 6330 and 7122]
Levy: In-person hearing: Abuse of discretion: Evidence: Offer in compromise. --

An Appeals officer's determination that the IRS could proceed with a levy against an individual taxpayer was not an abuse of discretion. The taxpayer's claim that she had requested, but was not granted, a face-to-face interview was not persuasive. Moreover, the taxpayer had been given 30 days to revise her offer in compromise, and her case was not closed for six weeks after that time period had lapsed, but even with the additional time, the taxpayer did not revise her offer or provide the additional information that had been requested. -.

Merry J. Chandler, pro se; Ann M. Welhaf and Jeffrey E. Gold, for respondent.

 

Held: R's Appeals officer did not abuse his discretion by sustaining a determination to proceed with collection by levy of P's unpaid liabilities following a telephonic conversation and an exchange of correspondence with P. P failed to prove that she requested a face-to-face interview with the Appeals officer during the course of the sec. 6330, I.R.C., hearing.

MEMORANDUM FINDINGS OF FACT AND OPINION

 

HALPERN, Judge: This case is before the Court to review a determination (the determination) made by respondent's Appeals Office (Appeals) that respondent may proceed to collect by levy petitioner's tax liabilities for her 1988, 1993, 1994, 1996, 1997, and 1998 taxable (calendar) years. We review the determination pursuant to section 6330(d)(1).¹ At the start of the trial in this case, respondent conceded that petitioner had paid in full her liability for 1993 and that respondent would not pursue a levy with respect to that year. We accept that concession and will reflect it in our decision. We therefore consider only respondent's proposed levy with respect to petitioner's unpaid liabilities for 1988, 1994, 1996, 1997, and 1998 (collectively, the unpaid liabilities). Petitioner's sole argument on brief is that Appeals erred in making the determination because it failed to accord petitioner the face-toface interview that she claims to have requested. Because petitioner has failed to persuade us that she requested a faceto-face interview, we sustain the determination.²

FINDINGS OF FACT

 

The parties filed a stipulation of facts, which, with accompanying exhibits, is incorporated herein by reference.

 

Petitioner resided in Bowie , Maryland , at the time the petition was filed.

 

On July 25, 2000 , respondent issued to petitioner a Final Notice --Notice of Intent To Levy and Notice of Your Right to a Hearing (the notice), which sets forth the unpaid liabilities and describes respondent's intent to levy on petitioner's property to collect those liabilities. On August 7, 2000 , petitioner timely filed a Request for a Collection Due Process Hearing (the request). On June 26, 2001 , the request was assigned to Appeals Officer Francis McNichol, Jr. Mr. McNichol maintained a written record of actions that he took with respect to the request that he considered to be significant, including correspondence and other contacts with petitioner and the final disposition of the request (the case activity record). The entry in the case activity record for October 12, 2001 , chronicles a telephone conversation with petitioner. In pertinent part, it states: "Personal conference is not necessary per [petitioner]. Telephone discussion will be fine." The remainder of the entry discusses (1) an offer in compromise that petitioner claimed to have filed, but as to which Mr. McNichol could find no evidence in an Internal Revenue Service ( IRS ) database, and (2) Mr. McNichol's advice to petitioner that, before an offer in compromise could be considered, she must file her 2000 return.

 

Mr. McNichol's entry in the case activity record for December 4, 2001 , states that petitioner filed her 2000 return and that the IRS received an offer in compromise from petitioner. The entry states that there were problems with the offer and that Mr. McNichol sent a letter to petitioner asking for revisions to the offer and for additional information; the entry further states that petitioner would be allowed 30 days to respond. An entry for January 2, 2002 , states that there had been no word from petitioner and that Mr. McNichol had determined to sustain the collection (levy) action. A further entry for that date states that Mr. McNichol had prepared the case for closing. Besides the entry on October 12, 2001 , no entry in the case activity record references any discussion of a personal conference.

 

On February 19, 2002 , Appeals issued to petitioner the determination.

OPINION

I. Introduction

If any person liable for Federal tax liability neglects or refuses to make payment within 10 days of notice and demand, the Commissioner is authorized to collect the tax by levy on that person's property. See sec. 6331(a). As a general rule, at least 30 days before taking such action, the Commissioner must provide the person with a written final notice of intent to levy that describes, among other things, the administrative appeals available to the person. See sec. 6331(d).

 

Upon request, the person is entitled to an administrative review hearing before Appeals (a collection due process hearing). Sec. 6330(b)(1). Appeals must offer the person an opportunity for a hearing, in person, at the Appeals Office closest to the person's residence. See sec. 301.6330 -1(d)(2), Q&A-D7, Proced. & Admin. Regs. Nevertheless, a collection due process hearing "may, but is not required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer * * *, or some combination thereof." Id. , Q&A-D6, Proced. & Admin. Regs. The Appeals officer conducting the collection due process hearing must verify that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(c)(1). Section 6330(c) prescribes the relevant matters that a person may raise at the collection due process hearing, including spousal defenses, the appropriateness of respondent's proposed collection action, and possible alternative means of collection. A taxpayer may contest the existence or amount of the underlying tax liability at a collection due process hearing if the taxpayer did not receive a statutory notice of deficiency with respect to the underlying tax liability or did not otherwise have an opportunity to dispute that liability. Sec. 6330(c)(2)(B).

 

Following the collection due process hearing, the Appeals officer must determine whether the collection action is to proceed, taking into account the verification the Appeals officer has made, the issues raised by the taxpayer at the hearing, and whether the collection action, "balances the need for the efficient collection of taxes with the legitimate concern of the * * * [taxpayer] that any collection action be no more intrusive than necessary." Sec. 6330(c)(3). We have jurisdiction to review such determinations where we have jurisdiction over the type of tax involved in the case. Sec. 6330(d)(1)(A); see Iannone v. Commissioner [Dec. 55,618], 122 T.C. 287, 290 (2004). Where the underlying tax liability is properly at issue, we review the determination de novo. E.g., Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 181-182 (2000). Where the underlying tax liability is not at issue, we review the determination for abuse of discretion. Id. at 182. Whether an abuse of discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law. See Ansley-Sheppard-Burgess Co. v. Commissioner [Dec. 50,547], 104 T.C. 367, 371 (1995).

II. Arguments of the Parties

Petitioner argues that, because petitioner was not granted a face-to-face interview, Mr. McNichol abused his discretion by determining that collection of the unpaid liabilities by levy was proper. Respondent answers that petitioner received an adequate hearing by telephone and exchange of correspondence and declined a face-to-face interview when, on October 12, 2001 , such an interview was offered.

III . Discussion

We decide whether, before Appeals determined to proceed by levy with collection of the unpaid liabilities, Appeals Officer McNichol accorded petitioner a fair hearing, as required by section 6330(b)(1). Procedures for the conduct of collection due process hearings are set forth in section 301.6330-1(d), Proced. & Admin. Regs. As set forth above, section 301.6330-1(d), Q&A-D6 and D7, Proced. & Admin. Regs., provides that, although a taxpayer must be offered a face-to-face interview, an acceptable hearing can consist of an exchange of correspondence or oral (telephonic) communications, or some combination of the two. See also Katz v. Commissioner [Dec. 54,081], 115 T.C. 329, 334-338 (2000); Armstrong v. Commissioner [Dec. 54,865(M)], T.C. Memo. 2002-224; cf. Parker v. Commissioner [Dec. 55,768(M)], T.C. Memo. 2004-226. Entries made by Mr. McNichol in the case activity record show both an exchange of correspondence and telephone conversations. Based on the testimony of Mr. McNichol and the corroborating October 12, 2001, entry in the case activity record, we believe, and find, that, on that date, Mr. McNichol offered petitioner the opportunity for a face-to-face interview, which she declined. We further find that petitioner did not thereafter change her mind and request a faceto-face interview. Petitioner testified that, at some time, perhaps after she received a letter from Mr. McNichol dated December 4, 2001, she telephoned him and asked to meet with him, and he refused. Mr. McNichol testified that he recalled no such request; indeed, he could recall no conversations with petitioner after December 4, 2001. The case activity record shows no communication with petitioner after December 4, 2001. Petitioner's testimony was inexact as to dates, and she offers nothing to corroborate her testimony. While petitioner may have decided at some point after initially having been contacted by Mr. McNichol on October 12, 2001, and declining a face-to-face interview, that, indeed, she did wish such an interview, we are unconvinced that she communicated that fact to Mr. McNichol.

IV. Conclusion

As we understand her underlying claim, petitioner argues that she should be allowed to make (and Appeals should accept) an offer in compromise of the unpaid liabilities. Petitioner attempted to make an offer in compromise, but Mr. McNichol found problems with the offer and asked petitioner to revise it and to provide him with additional information. Mr. McNichol gave petitioner 30 days to do so. At the end of 30 days, when petitioner had failed to make the revisions or provide the additional information, Mr. McNichol took steps to close petitioner's case and deny the request. It took more than 6 weeks for Appeals to close the case and issue the determination. Despite the additional 6 weeks, petitioner never revised the offer or provided the additional information. We do not think that Appeals abused its discretion in determining to proceed to collect the unpaid liabilities by levy. See Roman v. Commissioner [Dec. 55,522(M)], T.C. Memo. 2004-20 (reasonable to issue adverse section 6330 determination when, after 6 weeks, taxpayer had failed to submit information requested with respect to offer in compromise).

 

To reflect the foregoing,

 

An appropriate decision will be entered for respondent.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986.

² During the trial in this case, petitioner also claimed that she had paid in full her liability for 1997 and that Appeals Officer McNichol (the individual in Appeals assigned to her case) had failed to allow her reasonable time to submit an amended offer in compromise. Respondent denied both of those claims. At the conclusion of the trial, the Court instructed petitioner that she was required to file briefs. In particular, we instructed her that, as to any argument she wished to make, she should state in her brief the facts she wished the Court to find and then, based on those facts, argue her case to the Court. Petitioner filed both an opening brief and an answering brief. Although in her opening brief petitioner proposes facts and makes an argument with respect to the issue of whether she requested a face-to-face interview with Appeals Officer McNichols, she neither proposes facts nor makes any argument with respect to her claims that she paid in full her liability for 1997 or that Appeals Officer McNichols failed to allow her reasonable time to submit an amended offer in compromise. If an argument is not pursued on brief, we may conclude that it has been abandoned. E.g., Mendes v. Commissioner [Dec. 55,372], 121 T.C. 308, 312-313 (2003). Because of our instruction to petitioner concerning her brief and her pursuit on brief exclusively of the face-to-face interview issue, we conclude that she has abandoned her other two claims, and we need not discuss them.

 

Alliance Services, Inc., Plaintiff v. United States of America by and through the Commissioner of Internal Revenue Service, Defendant.

U.S. District Court, No. Dist. Ga. , Atlanta Div.; Civ. 1:04-CV-12-BBM, February 10, 2005 .

[ Code Sec. 7122]

Offers in compromise: Abuse of discretion. --

An Appeals officer did not abuse her discretion by denying a taxpayer's offer in compromise, despite the taxpayer's assertion that a change in circumstances had a detrimental effect on his financial position and his ability to earn future wages. In addition, although there were questions regarding whether the taxpayer could obtain the proceeds of a loan, the IRS 's treatment of the loan as an asset was within its discretion and did not constitute an error in judgment..

ORDER

MARTIN, District Judge: This matter is before the court on the Defendant's Motion for Partial Summary Judgment [Doc. No. 19] and Plaintiff's Cross-Motion for Summary Judgment [Doc. No. 23]. ¹



I. Factual and Procedural History

Plaintiff Alliance Services, Inc. (" Alliance "), a Georgia corporation, formerly had two lines of business: (1) providing security guard services and (2) providing ATM services to financial institutions. In 1999 and 2000, Alliance suffered approximately $120,000.00 in losses attributed to theft by employees. For two and a half years, from 2000 until mid-2002, Alliance paid only small portions of federal employment taxes. As of March 29, 2004, Alliance 's tax liability, including the unpaid taxes and penalties, was $3,613,291.77. For the first three quarters of 2000, the IRS assessed trust fund penalties against Robert Savoy ("Savoy"), the president and sole shareholder of Alliance, pursuant to 26 U.S.C. §6672. ²

On April 4, 2002, Alliance and Alliance Service Acquisition, LLC ("ASA"), entered an asset purchase agreement under which Alliance agreed to sell to ASA its assets relating to its ATM services. The asset purchase agreement provided that, at closing, Savoy had the right to borrow up to $800,000.00, subject to ASA's setting off of up to $90,000.00 for amounts, if any, which Savoy was required to indemnify ASA under the asset purchase agreement. On April 7, 2003, Savoy requested the line of credit from ASA. On April 8, 2003, Savoy was terminated by ASA for cause.

As a means to collect some of Alliance 's unpaid federal employment tax liabilities, Defendant, the Internal Revenue Service (" IRS "), determined that a levy should be imposed and placed Alliance on notice of its collection method. ³ On or around March 14, 2001, Alliance filed a request for a collection due process hearing with the IRS . Alliance asserted that (1) the penalties and interest should be abated due to "reasonable cause" for the "late payment and late filing" of its employment taxes; (2) instead of a levy, Alliance should be permitted to pay the tax through an installment agreement; and (3) the federal tax lien should be released. The IRS confirmed its receipt of Alliance 's request, and the hearing was assigned to IRS settlement officer Marilyn Alls ("Alls").

On December 31, 2002, Alliance submitted to Alls an offer to settle its delinquent federal employment tax liabilities of more than $3,000,000.00 for a payment of $250,000.00 ⁴ through the IRS 's Offer-in-Compromise program, explained in further detail below. Joseph Kennedy ("Kennedy"), an IRS offer specialist, reviewed the offer, considering the assets, liabilities, income, and expenses of Alliance and Savoy . ⁵ Kennedy determined that Alliance and Savoy could be expected to pay $1,317,517.00 on an offer and that a payment of $250,000.00 was insufficient. Alliance submitted a response dated September 10, 2003 to Kennedy's analysis. Alls then made adjustments to Kennedy's evaluation and determined that the minimum offer acceptable from Alliance was $687,309.40, which Alls rounded up to $700,000.00. On November 17, 2003, during a telephone conversation, Alliance requested that Alls send a facsimile containing the amended computation of assets, income, and expenses. Alls did so and requested, in her facsimile, a response from Alliance by November 19, 2003. After Alliance had received the facsimile, Alliance contacted Alls and asserted that the following changes in circumstances had occurred, adversely affecting Savoy's financial circumstances: (1) he had lost his job; (2) he had been unable to find a similar position due to a covenant-not-to-compete; (3) he had been fired "for cause," and his former employer had refused to provide severance or other loans provided in the original purchase agreement; and (4) his wife had sued him for divorce. ⁶

The IRS sent a letter dated December 4, 2003, in which it denied Alliance 's offer. ⁷ On December 5, 2003, the IRS issued its Notice of Determination, upholding its decision to collect by levy. ⁸ The parties have filed motions for summary judgment, and both motions are opposed. ⁹



II. Legal Analysis

A. Background

Section 6331(a) of the Internal Revenue Code provides that:

If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax ... by levy upon all property and rights to property ... belonging to such person or on which there is a lien ....

26 U.S.C. §6331(a). "No levy may be made ... unless the Secretary has notified such person in writing of their right to a hearing." 26 U.S.C. §6330(a)(1). The hearing, referred to as a collection due process hearing, includes a meeting between the hearing officer and the taxpayer as well as any written correspondence regarding the substantive issues. See 26 C.F.R. §301.6330-1(d)(2) Q&A-D6. The taxpayer "may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy ...." 26 U.S.C. §6330(c)(2)(A). An IRS official must verify that the requirements of applicable law or administrative procedure have been met. See id. at §6330(c)(1). In this case, no party disputes that the IRS has attempted to collect Alliance 's employment tax liabilities through levy and that the relevant requirements for a collection due process hearing have been satisfied.

Through the IRS 's Offer-in-Compromise program, the IRS and the taxpayer may reach an agreement that resolves the taxpayer's liability. Specifically, the IRS may compromise a liability by accepting less than full payment if there is doubt as to liability, doubt as to collectibility, or to promote effective tax administration. See generally 26 U.S.C. §7122(a); Fed. Tax Coordinator T-9610 (2d ed. 2005). Based on a review of the taxpayer's financial status, the IRS determines the minimum acceptable level of an offer. See 26 C.F.R. §301.7122-1. In this case, Alliance proposed an offer to settle its employment tax liabilities, which was considered and rejected by the IRS .

The instant dispute arises from the question of whether Alls, after considering the proceedings of the due process hearing and the accompanying materials provided by Alliance, exercised discretion properly in rejecting Alliance's offer to compromise its tax liabilities and upholding the levy. If the validity of a tax assessment was properly raised at the collection due process hearing, the decision as to validity is reviewed de novo, but all other determinations, such as those presently at issue in this case, are reviewed under an abuse of discretion standard, an extremely deferential form of review. ¹⁰ See Johnson v. United States [ 2003-2 USTC ¶50,721], No. Civ. A. 1:03CV0475- GET , 2003 WL 22989550, at *3 (N.D. Ga. Oct. 8, 2003) (Tidwell, J.); MRCA Info. Servs. v. United States [ 2000-2 USTC ¶50,683], 145 F.Supp.2d 194, 199 (D. Conn. 2000).

The Eleventh Circuit has observed that an "abuse of discretion" standard of review recognizes that for the matter in question there is a range of permissible choice for the decision-maker below.... So long as the decision under consideration does not amount to a clear error of judgment, a reviewing court may not reverse just because it would have gone the other way had the choice been its to make.

Sillavan v. United States [ 2002-1 USTC ¶50,236], No. 01CV803, 2002 WL 400804, at *4 (N.D. Ala. Jan. 11, 2002 ) (citing McMahan v. Toto, 256 F.3d 1120, 1128 (11th Cir. 2001)). Another district court has also elaborated on the definition of abuse of discretion. "[A]n arbitrary action not justifiable in light of the facts and circumstances presented in the record" or a decision "made without a rational explanation" constitutes an abuse of discretion. Dudley's Commercial & Indus. Coating, Inc. v. United States Internal Revenue Serv. [ 2003-1 USTC ¶50,397], 292 FSupp.2d 976, 985 (M.D. Tenn. 2003) (citations omitted). Because the court will review Alls' action under an abuse of discretion standard, its review will be limited to the administrative record, see Camp v. Pitts, 411 U.S. 138, 142 (1973), which consists of the collection due process hearing and the subsequent communications leading up to the IRS 's ultimate decision. ¹¹

B. Applicable Legal Standard ¹²

Summary judgment is proper "if ... there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In considering a motion for summary judgment, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The plaintiff must do more than show some level of doubt as to the material facts. "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient ...." Id. at 252. As such, the non-movant may not avoid summary judgment with evidence that is "merely colorable or is not significantly probative." Raney v. Vinson Guard Serv., Inc., 120 F.3d 1192, 1196 (11th Cir. 1997).

C. Motions for Summary Judgment

Alliance moves for summary judgment because it asserts that the IRS abused its discretion in denying Alliance 's offer and thereby abused its discretion in upholding collection by levy of Alliance 's employment tax liabilities. Specifically, Alliance states: (1) the lapsed right to borrow money from ASA is a revoked line of credit and should not be considered an asset; (2) the IRS improperly refused to consider adverse consequences of certain changes in Savoy's life; (3) the IRS based its denial of Alliance's offer on a non-existent policy; (4) the IRS did not provide reasonable time for Alliance to provide collection alternatives before issuing its Notice of Determination; and (5) the levy violated statutory requirements with respect to the fourth quarter of 2000. The IRS moves for summary judgment because it asserts that Alls did not abuse her discretion in sustaining the use of a levy to collect Alliance 's unpaid federal employment tax liabilities.



Consideration of the Loan as an Asset

In April 2002, when Alliance sold a portion of its business to ASA, as part of the consideration, ASA agreed to lend Savoy $710,000. Based upon this, Alls factored in $350,000 as a source of funds from which Savoy could pay his tax liability. ¹³ Savoy asserts that Alls should not have treated the loan as an asset, or at least as an asset with any value, because he was terminated for cause and asserts he could no longer gain access to the loan. ¹⁴ The IRS defends its action on the grounds that Savoy 's right to borrow was not tied to his employment, and Savoy provided no evidence supporting that the loan from ASA was no longer available to him. The court must first determine whether Alliance presented evidence to Alls that the loan was not available to Savoy . If so, then the court must evaluate whether Alls abused her discretion in characterizing the loan as an asset to be factored into the minimum acceptable offer.

The record shows that Joseph Odom ("Odom"), Alliance 's representative, sent a letter dated September 10, 2003 to the IRS , in which he explained that ASA had refused to provide any amount of the line of credit to Savoy . The court recognizes Alls' assertion that Alliance did not provide certain documents related to the litigation between Savoy and ASA over the unpaid loan, yet Alls also acknowledges that Alliance had asserted to her that ASA was refusing to provide the loan to Savoy . Additionally, Odom avers that in previous conversations with the IRS , Odom offered to enter into a collateral agreement ¹⁵ assigning at least a portion of any loan proceeds Savoy ever received under the line of credit, but the offer was ignored. Alls states that she "do[es] not recall this statement, although it may have been made." Based on the evidence in the record, it appears to the court that the IRS was aware that ASA had not paid the loan to Savoy .

Next, the court must evaluate whether it was within the IRS 's discretion to characterize the loan as an asset. According to the IRS 's policies, it is entirely proper for a taxpayer to satisfy a liability with borrowed assets. See generally Internal Revenue Manual §5.8.5.3.3 (noting that the IRS will consider future effects on expenses and income when a taxpayer borrows against an income-producing asset to contribute proceeds to an offer); Internal Revenue Manual §5.8.3.19.2 (noting that the IRS may mandate that taxpayers secure a loan on their equity or enforce collection through levy); Internal Revenue Manual §5.8.5.3.7 (noting that the IRS will adjust the value of a taxpayer's insurance policy if he has borrowed on the policy to help fund an offer).